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Avoiding the pitfalls: What companies need to know about EU State aid rules and the Temporary Framework during the coronavirus crisis

In this article, published with Concurrences, Leigh Hancher and David Gabathuler (Baker Botts LLP) consider the EU Temporary State Aid Framework, recently introduced as a result of the coronavirus crisis, and assess what it means, in reality, for companies.

May 28, 2020

The global economy has come to a standstill, and governments around the world have had to intervene massively to support their domestic economies during the coronavirus crisis. Government support to industry is only likely to increase as companies face ever-greater financial difficulties due to the continuing public health restrictions.

In the EU, government aid to companies is in principle forbidden, as it harms the integrity of the Single Market, but there are specific exceptions foreseen in the EU Treaty. The damage caused by the coronavirus pandemic clearly falls within these exceptions. However, unless block exempted, aid measures (or aid schemes) falling within the EU State aid rules are subject to notification and prior approval by the European Commission if the aid is not to be found illegal and subject to possible recovery.

The Commission adopted the Temporary Framework on 19 March 2020, with a further amendment introduced on 3 April 2020, to address State aid from Member States to domestic industries during the coronavirus crisis. To date, the Commission has approved over 120 aid schemes worth hundreds of billions of euros under the TF. Given the scope of the crisis, many companies will be receiving State aid in the EU for the first time or will consider applying for such aid, but they may have limited experience or insight into the complexity of the rules. This article is intended to clarify the application of the State aid rules and, in particular the operation of the TF.

The article briefly outlines government support measures that do not constitute State aid and then highlights existing EU State aid instruments and schemes that provide some means for the Member States to channel aid to large numbers of companies. The piece then provides an overview of the TF before discussing, in detail, some of the key points that should not be overlooked by beneficiaries/potential beneficiaries, in particular as regards the operation of the TF. Finally, the article draws attention to the consequences and risks if EU State aid rules are not respected.

To read the full article, click here.

For more on this topic, check out our recent podcast with Clemens Ziegler in which he outlines the terms of the COVID-19 Temporary State Aid Framework, which can be found here.